Hospitality leaders discuss the ‘sharing effect’

Hotel professionals in Vancouver have mixed emotions about the challenges they face

Nov 13, 2015

Airbnb, the online hotel-alternative service that lets you rent rooms or apartments when you’re traveling, is described by most in the hospitality industry as a “disturber.” However, not everyone agrees on whether that’s a bad thing.

We asked local hoteliers about “shared-economy” companies like Airbnb, and how they are shaping the hospitality landscape. And while it’s difficult to quantify their impact (experts say it differs depending on location, length of stay and demographics), its not as drastic as one might think.

According to PKF Hospitality Research, a CBRE Company, hotel occupancy is on track to reach a record this year, with the national occupancy rate predicted to reach its highest (65 percent) in decades.

This helps explain why people like Rick Takach, president of Vancouver-based Vesta Hospitality, aren’t exactly quaking in their boots at the thought of competition from Airbnb.

“We welcome any competition,” he said. “I do have some problems with how they (Airbnb and the like) get by with no regulations, no zoning requirements and paying no taxes. This creates a safety security issue. It is not a level playing field.

“The whole thing is shady,” Takach added. “If they were legit, I wouldn’t say anything – if they had to pay taxes and meet regulation codes.”

Despite the objections, Takach explained that when it comes to services like Airbnb, his concerns are tempered – at least for now.

“Right now, hotels here are doing very well, in a progressive period,” he said. “However, that is not sustainable. This industry does have a market cycle. When business declines, that’s when it will hurt.”

Brian McClary, hotel manager of the Heathman Lodge, said that to date, Airbnb hasn’t had a measurable impact on business at the iconic Vancouver hotel.

“I’ve been here for 17 years,” he said. “We have not felt an impact in our area from AirBnB and others.”

McClary is also the director of revenue for CoHo Services, which manages 17 hotels in Washington and Oregon, and he sits on the Visit Vancouver board with other hotel GMs where he said that the shared-economy rentals “have not been a hot-button issue.”

According to McClary, online shared-economy services simply cannot compete with the level of personalized customer service that venues like the Heathman Lodge can provide.

“What are we in this business for?” he queried. “We’re in it to provide great service and to personalize it. That will never change. [So] I worry about our world, what we are doing to guarantee great customer service.”

Like Takach, if McClary has one area of concern regarding Airbnb-type services, it has to do with the lack of regulations that these industry newcomers currently enjoy.

“[With lax regulation,] the thing that I look at is safety and security,” he said. “That is first and foremost.”

At Washington State University Vancouver, two hospitality program professors said the shared-economy direction within the industry is not a bad thing. In fact, Dr. Iis Tussyadiah and Dr. Florian Zach said there’s no conflict with the hotel business.

“It is a different kind of travel experience, sometimes at a better price,” said Tussyadiah. “The peer-to-peer travelers travel more often, stay longer and pay less for the accommodations.”

“One way to look at it,” explained Zach, “[is] the market is very segmented – 19 different brands belong to Marriott. Airbnb is a very different experience.

“We are rapidly growing,” she said. “We have the new Townplace Suites and the development of two multi-million dollar waterfront parks being constructed. We experienced a 3.1 annual increase is total visitor spending last year.”

Leveling the playing field

A number of cities around the world are beginning to regulate shared-economy companies like Airbnb. In New York City, Paris and Berlin, for example, city governments have prohibited property owners from renting out their homes via profit-sharing Internet travel sites. And although it was rejected by voters this month, San Francisco considered a proposal that would have limited the nights a home can be rented while also requiring the homeowner to file quarterly reports to the city.

“AirBnB had to respond,” commented Takach on the San Francisco proposition. “Their business model was under attack. No wonder they put in millions [of dollars]. But they only defeated it by ten percent of the vote.”

“I feel it’s location-driven,” said McClary, when asked about using legislation to level the regulatory playing field. “You may never see that here in Vancouver.”

McClary said he understands the desire to address the hotel-alternative services via a legislative solution, but he’s also open to working collaboratively with the new players.

“There may come a time when AirBnB will have a special section devoted to hotel rooms,” he said. “If they came to me, offering such a special section, I would sit down and listen.”

While some in the hospitality industry consider AirBnB the new, renegade bad boy on the block, Takach said there are other challenges to deal with right now that carry more weight.

“The current administration passed regulations that have added a ton of paperwork to my company, not to mention the minimum wage pressures,” he said. “The other thing is that even though unemployment is down, it seems a little harder now to find good people who want to work.”

Despite those challenges, Takach balances the pros and cons.

“Occupancy is high, and wear and tear is high. Not a bad problem to have,” he said.

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